It is almost as if the wild turns in the Manhattan real estate market during the pandemic didn’t happen. Almost.
The frenzy to buy apartments in Manhattan took off in 2021 as the city bounced back from the worst of the pandemic. But it nosedived at the end of 2022, with the market returning to its pre-pandemic trajectory as sales dropped and prices slipped. The only outlier is that inventory is still slow to materialize.
The median price of all apartments in Manhattan in the fourth quarter was $1,100,500, down 5.5% from the prior year, according to a report from brokerage firm Douglas Elliman and Miller Samuel Real Estate Appraisers and Consultants. This is the first time in the pandemic era that the year-over-year price has dropped. Even so, the median cost of an apartment remains above pre-pandemic prices.
Prices dropped 4.7% between the third and fourth quarters, as mortgage rates really surged, ultimately reaching as high as an average of 7.08% for a 30-year, fixed-rate loan in October and November, according to Freddie Mac.
The largest share of condos sold were one-bedrooms with a median price of $1,140,000. The median price for a two-bedroom condo was $2,150,000. Median prices of co-ops were lower, at $710,000 for a one-bedroom, and $1,325,000 for a two-bedroom.
Higher rates and still-high housing prices cooled demand at the end of last year, causing sales to tumble. Sales dropped 28.5% in the fourth quarter compared to the fourth quarter of 2021.
The huge drop in sales at the end of 2022 was largely because the year before was such a historic anomaly.
“The Manhattan sales market is exiting the euphoric market of 2021 and moving to something closer to normal,” said Jonathan Miller, president and CEO of Miller Samuel.
Another reason for the slowdown:few apartments coming to market, he added.
Would-be home sellers across the country have become locked in to their current apartments because they purchased or refinanced into ultra-low mortgage rates during the past few years and are reluctant to buy at the current, much higher rate.
As a result, there were 6,523 listings in Manhattan at the end of the fourth quarter. That’s 5% higher than the fourth quarter of 2021, but 15.7% less than the third quarter of 2022.
“The numbers are essentially acting like the pandemic didn’t happen,” said Miller.
Looking at the market metrics of prices, sales and inventory, both prices and sales are going up from their pre-pandemic levels at a modest pace, with prices rising 10% above 2019 levels and sales 6% higher.
But inventory is down about 2%, which is odd, said Miller.
“This is an unusual situation where the low inventory is the by-product of mortgage rates being cut to the floor,” Miller said, eviscerating supply. “Normally, you’d expect inventory to expand with significant rate growth.”
Looking ahead, neither buyers nor sellers should expect much from the market. Miller is calling 2023, “the year of disappointment.”
“Sellers aren’t going to get the prices they got in 2021 and buyers aren’t going to get much improvement on affordability from 2022,” he said. “Meanwhile, banks are disappointed because their pipeline is going dusty.”